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Per pages 26 and 27 of its Form 10-K (annual report) filed April 17, 2009, Krispy Kreme Donuts has
listed the following as its current objectives:
1. Reduce the investment required to produce a given level of sales and reduce operating costs by
operating smaller satellite stores instead of larger, more expensive factory stores .
2. Achieve greater production efficiencies by centralizing doughnut production to minimize the burden of
fixed costs.
3. Achieve greater consistency of product quality through a reduction in the number of doughnut-making
locations.
4. Enable store employees to focus on achieving excellence in customer satisfaction and in-shop
consumer experience.
5. Stimulate an increase in on-premises sales of doughnuts and complementary products by increasing
the number of retail distribution points to provide customers more convenient access to the company’s
products.
Regarding strategies, the Form 10-K filed April 17, 2009 notes a few:
1. Open up new (or convert traditional factory stores to) "hot shops" that provide a hot doughnut
experience for customers throughout the day, instead of the traditional experience of having the hottest,
freshest doughnuts available only at certain times of the day---these "hot shops" would be added to
the traditional fresh shops and kiosks as the primary methods for market penetration while reducing
operating costs.
2. Open up new company-owned satellite stores for additional market penetration.
3. The company also plans to extend its testing of soft serve dairy products into additional
locations in fiscal 2010 as part of its product development.
4. Close stores that are not performing to company standards.
Vision
Krispy Kreme Donuts "Vision and Values" can be found on their web site
(http://investor.krispykreme.com/includes/stupop.html).
"We Believe...
Vision Statement
From Krispy Kreme Donut's "Vision and Values" provides the following Vision Statement: "To be the global
leader in doughnuts and complementary products, while creating magic moments worldwide."
Competitive Profile Matrix (CPM)
1. Analysis: Please analyze the information presented above and discuss what conclusions you can
draw from this information.
Opportunities
1. Families crave convenience because of busy lifestyles 0.08 3 0.24
2. Asians love sweets and are open to trying foreign foods 0.05 2 0.10
3. Starbucks lacks a diversified and distinctive pastry line 0.10 3 0.30
4. Dunkin' Donuts does not have hot doughnuts to sell 0.07 4 0.28
5. Many children love sweet treats 0.03 2 0.06
6. Tim Hortons has yet to expand beyond the U.S. and Canada, and 0.04 2 0.08
its product line does not appear to be competitive
7. South America, Africa, and Southern Asia are markets to conquer 0.09 1 0.09
Threats
8. Dunkin' Donuts presently dominates the doughnut market, 0.12 1 0.12
particularly in northeastern U.S.
9. People are becoming more health-conscious, which does not bode 0.08 2 0.16
well for high-sugar, high-fat treats
10. Starbucks has approximately 25 times the amount of stores 0.08 1 0.08
worldwide that Krispy Kreme Donut has
11. Restricted cash flow from banks and massive layoffs have stifled 0.06 2 0.12
the world economy, decreasing discretionary income
12. Europeans prefer their local brands of doughnuts 0.05 2 0.10
13. Britons tend not to have cars, which inhibits drive-thru customers, 0.06 2 0.12
and their eating habits and office etiquette differ from Americans
14. Shareholders may sell Krispy Kreme Donut stock for lack of 0.09 1 0.09
returns and dividends compared to other similar firms in the industry
2. Analysis: Please analyze the information presented above and discuss what conclusions you can draw
from this information.
Strengths
1. Affordable, high-quality doughnuts with strong visual appeal and 0.09 4 0.36
"one-of-a-kind" taste
2. Neon "Hot Doughnuts Now" sign encourages people outside the 0.06 3 0.18
store to make an impulse purchase
3. Market research shows appeal extends to all major demographic 0.08 4 0.32
groups including age and income
4. "Hot shop" stores save money while keeping Krispy Kreme Donuts 0.07 3 0.21
customer experience intact
5. Vertical integration helps ensure high quality product 0.07 3 0.21
6. Consistent expansion; now in 16 countries 0.08 3 0.24
7. Product sold at thousands of supermarkets, convenience stores, 0.06 3 0.18
and retail outlets through U.S.
Weaknesses
1. Return on equity, assets, and investments all negative in the 0.10 1 0.10
trailing twelve months; skill of management is questionable
2. Shareholders have not received dividends recently, and are not 0.07 1 0.07
expected to in near future; stock price in state of flux
3. Closing stores when stores should be opening globally at steady 0.06 2 0.12
rate to keep up with competitors' growth
4. Management states in recent 10-K that it is struggling with how to 0.07 1 0.07
make stores profitable
5. Product line slow to expand with nothing outside "sweet treats" to 0.04 2 0.08
draw in health-conscious customers
6. Advertising not aggressive enough to appeal to areas outside 0.03 2 0.06
southeast of U.S. where most stores are
7. Revenues down, net losses in each of past three years 0.08 1 0.08
8. Per 10-K, continued disputes with franchisees could hurt future 0.04 2 0.08
business
3. Analysis: Please analyze the information presented above and discuss what conclusions you can draw
from this information.
Strengths-Weaknesses-Opportunities-Threats Matrix (SWOT)
Strengths Weaknesses
1. Affordable, high-quality 1. Return on equity, assets,
doughnuts with strong visual and investments all
appeal and "one-of-a-kind" taste negative in the trailing
twelve months; skill of
2. Neon "Hot Doughnuts Now" sign mgmt is questionable
encourages people outside the
store to make an impulse purchase 2. Shareholders have not
received dividends recently,
3. Market research shows appeal and are not expected to in
extends to all major demographic near future; stock price in
groups including age and income state of flux
6. Advertising not
aggressive enough to
appeal to areas outside
southeast of U.S. where
most stores are
4. Analysis: Please analyze the information presented above and discuss what conclusions you can draw
from this information.
Strategic Position and Action Evaluation Matrix (SPACE)
Financial strength (FS) factors include: Profit (+1); Sales Growth (+2); and Cash Flow (+2)
1 + 2 + 2 = 5; 5/3 = 1.67.
Competitive advantage (CA) factors include: Customer loyalty (-2); Product quality (-1); and Market share (-5)
**For the above, KKD's financials were compared against competitors Dunkin' Donuts, Starbucks, and Tim
Hortons. (http://finance.yahoo.com/q/co?s=kkd)
Environmental Stability (ES) factors include: Barriers to entry into market (-4); Risk involved in business (-3);
-4 + -3 + -4 = -11/3 = - 3.67
Industry Strength (IS) factors include: Profit potential (+2); Financial stability (+1); and Technological know-how
(+4)
2 + 1 + 4 = 7/3 = 2.33
Conservative FS Aggressive
+6
+5
+4
+3
+2
+1
CA -6 -5 -4 -3 -2 -1 +1 +2 +3 +4 +5 +6 IS
Defensive -1 Competitive
-2
-3
-4
-5
-6
ES
5. Analysis: Please analyze the information presented above and discuss what conclusions you can draw
from this information.
Krispy Kreme Donuts has three business segments, and they are presented here along with their
annual revenues per Form 10-K filed on April 17, 2009: Company Stores ($266M), Franchise ($26M) and
Krispy Kreme Supply Chain ($93M), with approximately $384M in total revenues for the year ending February
1, 2009. This means that each business segment represented the following percentage in revenues: Company
Stores (69.2%), Franchise (6.7%), and Krispy Kreme Supply Chain (24.1%).
Profits for each business segment are as follows: Company Stores ($-2M); Franchise ($18M); and KK
Supply Chain ($25M), for a total of $41M in profits. Therefore, Company Stores has 0% of the profits;
Franchise has about 41%; and Krispy Kreme Supply Chain has about 59%.
We’ll assume that Company Stores has 3% of the market share and a -13% growth rate; Franchise
has 3% of the market share and a 10% growth rate; and Krispy Kreme Supply Chain has 3% of the market
High +20
Low -20
6. Analysis: Please analyze the information presented above and discuss what conclusions you can draw
from this information.
Grand Strategy (GS) Matrix
Quadrant II Quadrant I
7. Related Diversification
WEAK STRONG
COMPETITIVE COMPETITIVE
4. Divestiture
5. Liquidation
7. Analysis: Please analyze the information presented above. Discuss which quadrant of the Grand
Strategy matrix Krispy Kreme Donuts is in and what possible strategies they should utilize.
Quantitative Strategic Planning Matrix (QSPM)
In the QSPM two strategic alternatives were compared: whether KKD should discontinue its Company
Store segment and concentrate solely on building the Franchise segment via the "hot shop" model, or whether
it should continue the slow and steady growth of its Company Stores and Franchise business segments
STRATEGIC ALTERNATIVES
1) Discontinue company 2) Continue slow and steady
stores and concentrate solely growth of Company Store and
on building Franchise via "hot Franchise business segments
shop" stores through traditional business
model (without "hot shops")
Key Factors Weight AS TAS AS TAS
Opportunities
1. Families crave 0.08 --- ---
convenience because of
busy lifestyles
2. Asians love sweets and 0.05 --- ---
are open to trying foreign
foods
3. Starbucks lacks a 0.10 --- ---
diversified and distinctive
pastry line
4. Dunkin' Donuts does not 0.07 4 0.28 3 0.21
have hot doughnuts to sell
5. Many children love 0.03 --- ---
sweet treats
6. Tim Hortons has yet to 0.04 4 0.16 3 0.12
expand beyond the U.S.
and Canada, and its
product line does not
appear to be competitive
7. South America, Africa, 0.09 3 0.27 2 0.18
and Southern Asia are
markets to conquer
Threats
1. Dunkin' Donuts presently 0.12 3 0.36 1 0.12
dominates the doughnut
market, particularly in
northeastern U.S.
2. People are becoming 0.08 --- ---
more health-conscious,
which does not bode well
for high-sugar, high-fat
treats
3. Starbucks has 0.08 2 0.16 1 0.08
approximately 25 times the
amount of stores worldwide
that KKD has
4. Restricted cash flow 0.06 --- ---
from banks and massive
layoffs have stifled the
world economy, decreasing
discretionary income
5. Europeans prefer their 0.05 --- ---
local brands of doughnuts
6. Britons tend not to have 0.06 --- ---
cars, which inhibits drive-
thru customers, and their
eating habits and office
etiquette differ from
Americans
7. Shareholders may sell 0.09 2 0.18 1 0.09
KKD stock for lack of
returns and dividends
compared to other similar
firms in the industry
1.00
Strengths
1. Affordable, high-quality 0.09 --- ---
doughnuts with strong
visual appeal and "one-of-
a-kind" taste
2. Neon "Hot Doughnuts 0.06 4 0.24 3 0.18
Now" sign encourages
people outside the store to
make an impulse purchase
3. Market research shows 0.08 --- ---
appeal extends to all major
demographic groups
including age and income
4. "Hot shop" stores save 0.07 4 0.28 1 0.07
money while keeping KKD
customer experience intact
5. Vertical integration helps 0.07 --- ---
ensure high quality product
6. Consistent expansion; 0.08 --- ---
now in 16 countries
7. Product sold at 0.06 --- ---
thousands of
supermarkets, convenience
stores, and retail outlets
through U.S.
Weaknesses
1. Return on equity, assets, 0.10 3 0.30 1 0.10
and investments all
negative in the trailing
twelve months; skill of
mgmt is questionable
2. Shareholders have not 0.07 --- ---
received dividends
recently, and are not
expected to in near future;
stock price in state of flux
3. Closing stores when 0.06 3 0.18 1 0.06
stores should be opening
globally at steady rate to
keep up with competitors'
growth
4. Management states in 0.07 4 0.28 1 0.07
recent 10-K that it is
struggling with how to
make stores profitable
5. Product line slow to 0.04 --- ---
expand with nothing
outside "sweet treats" to
draw in health-conscious
customers
6. Advertising not 0.03 --- ---
aggressive enough to
appeal to areas outside
southeast of U.S. where
most stores are
7. Revenues down, net 0.08 3 0.24 1 0.08
losses in each of past three
years
8. Per 10-K, continued 0.04 1 0.04 2 0.08
disputes with franchisees
could hurt future business
8. Analysis: Please analyze the information presented above and discuss what conclusions you can draw
from this information.
Income Statement and Balance Sheet
9. Analysis: Please analyze the information presented above and discuss what conclusions you can draw
from this information.
Summary of Conclusions
10. Analysis: Please provide a summary of the analyses that have been developed based on the
information provided.
Recommendations
11. Analysis: Please analyze the information presented above and discuss what conclusions you can draw
from this information.